Overview
- From April 2027, tax on savings interest will increase to 22% for basic-rate, 42% for higher-rate, and 47% for additional-rate taxpayers.
- The personal savings allowance remains in place at £1,000 for basic-rate and £500 for higher-rate taxpayers, with an example showing a basic-rate saver needs roughly £22,000 at 4.5% interest to exceed the allowance.
- For savers under 65, the annual cash ISA limit will drop to £12,000 in April 2027, while the overall ISA allowance stays at £20,000 and over-65s remain exempt from the cash cap.
- Experts recommend sheltering savings in ISAs, seeking higher employer pension contributions, or using SIPPs to offset the impact of the changes.
- Guidance highlights that new salary sacrifice limits can reduce the tax-free benefit of pension contributions, with one example indicating an average earner sacrificing £200 a month could be £112 worse off over a year.